GRAND DUCHY OF LUXEMBOURG — The Board of Directors of IVS Group S.A., convened on March 19th, 2019, and chaired by Mr. Paolo Covre, examined and approved the Annual Report 2018 (statutory and consolidated), the Management Report and related documents and the Sustainability Report.
Considering the good results reached in 2018, the Board resolved to propose to the Annual General Meeting the payment of an ordinary dividend equal to Euro 30 cents per share (+7.1% on 2017) and the authorisation for a Buy-Back programme of treasury shares, up to a maximum of n. 1,000,000 shares to be acquired at a price between Euro 20 (maximum) and Euro 1 (minimum) per share; the authorisation will last 60 months.
The Board, after hearing the opinion of the Remuneration Committee, approved some minor amendments to the 2019-2021 management Incentive Plan (communicated on 15 November 2018 and approved by the shareholders meeting on 28 December 2018) that provides to award shares of the company, up to a maximum of n. 355.000 shares (from previous 350,000), to some key person (increased from 33 to 34 persons) operating within IVS group; such amendments are also related to the submission of the application of listing of IVS Group shares on the STAR segment of MTA of Borsa Italiana.
The Board has mandated the Chairman to convene the Annual Shareholders’ Meeting, in accordance with law and the Company’s statute, on 14 May 2019, at 11.00 at IVS Group registered office, 18 Rue de l’Eau L – 1449, L-Luxembourg, Grand Duchy of Luxembourg, to vote on the approval of the Annual Report 2018 and related matters, the allocation of the Company’s result, the buy-back programme and the renewal of the auditors’ mandate.
Summary of results at 31 December 2018
- Consolidated Revenues: Euro 434.4 million, +6.2%, compared to 2017.
- EBITDA reported: Euro 91.1 million, +9.6% compared to 2017.
- Adjusted EBITDA2: Euro 93.4 million, +2.3%, with an EBITDA margin on sales of 21.5%.
- Group Net Profit: Euro 23.2 million, after profits attributable to minorities of Euro 1.4 million, +19.1% vs 2017.
- Adjusted Net Profit: Euro 24.9 million, after minorities of Euro 1.4 million.
- Completed 9 new acquisitions in Italy and France, with an Enterprise Value of around Euro 14.6 million.
Consolidated revenues in 2018 reached Euro 434.4 million (of which 395.9 million related to the core vending business), with an increase of 6.2% from 409.1 million in 2017 (Euro 377.4 million in vending).
Total sales increased by 7.2% in Italy, by 1.4% in Spain, 1.6% in France and 6.1% in Switzerland. Coin Service division sales increased in total by 18.5% (+3.8% in the core metal coins business), mainly due to the start-up of the new businesses, digital payments and IoT, in the subsidiary Venpay S.p.A..
Vending sales (like-for-like and at par working days) increased by 2.2% overall: +3.3% in Italy, -2.5% in Spain, -0.7% in France and -15,3% in Switzerland (the last not being very significant, given its small size). In general terms, sales were affected, in Italy, during the first part of the year, by unusual unfavourable meteo events (business closure in Rome due to snowfalls), and in Spain, in the last part of the year, there was a significant decrease of volumes in some major industrial clients (i.e. in the automotive industry).
The total number of vends of the period was equal to around 834.3 million, +3.7% from 804.8 million of 2017. Confirming the trend of previous years and quarters, also in the last part of 2018 IVS shows an acquisition rate of new clients higher than the churn rate.
Average price per vend was equal to Euro 47.45 cents, from 46.89 cents of 2017 (+1.2%).
During 2018 were completed 9 acquisitions (of which 7 in Italy and 2 in France), with an Enterprise Value of Euro 14.6 million, contributing Euro 5.6 million to sales on pro-rata basis from the date of the acquisition. In 2017 acquisitions were 16 (with a value of Euro 37.1 million and contributing Euro 32.1 million of contribution to sales of the period).
EBITDA reported increased by 9.6% compared to 2017, from Euro 83.1 million to Euro 91.1 million. Adjusted EBITDA grew by 2.3%, from Euro 91.2 million to Euro 93.4 million, with an EBITDA margin on sales of 21.5%. The EBITDA of the period was influenced, in addition to the trend of sales and operating costs, also by some specific factors: the capital loss on the sale in Italy and abroad of used vending machines, and the start-up costs for the new IoT business in Coinservice division, for an amount (not included amongst adjustments) of around Euro 1 million.
Group Net Profit in 2018 is equal to Euro 23.2 million (after profits attributable to minorities of Euro 1.4 million) +19.1% compared to Euro 19.5 of 2017 (after minorities of Euro 1.4 million). Net profit includes some costs and profits considered of exceptional nature, totalling Euro 1.6 million (net of tax effects) mostly related to the acquisitions competed. The Net Profit Adjusted for the exceptional items is equal to Euro 24.9 million (after minorities), increased by 1.5% from Euro 24.5 million. Net profit is influenced by the increase of depreciation from Euro 43.4 million to 46.1 million, party related also to higher depreciation (+0.8 million) on intangible components of acquisitions (the residual value of client list, Euro 49.4 million, increased by Euro 9.4 million in 2018) according to accounting principles and tax deductible. In 2018 the higher taxes deriving from the application of new and worsened criteria on ACE (Italian tax incentives on growth) was partially offset by the higher tax deductible depreciation on new capex in advanced technologies and appliances, that will be spread over the next 6-7 years (extraordinary depreciation according to Industry 4.0 plan).
Net Financial Position (“NFP”), is equal to Euro -285.5 million (from Euro -254.1 million at the end of 2017) after payments for net investments of Euro 66.8 million, of which Euro 49.0 million for net investment in fixed assets – including those linked to newly acquired businesses and done in previous quarters – and Euro 17.8 million for payments related to acquisitions.
The relevant size of capex policy was determined by an overall acceleration and by anticipated payments necessary for taking advantage of the higher tax deductible depreciations, but mainly also by the commercial strategy, aimed at sustaining the offer through a product and service mix with a growing added value, higher than market average in absolute amount. This strategy is consistent with a scenario that presents new challenges and interesting market opportunities.
With reference to working capital management, in 2018, unlike 2017, there was a net use of funds a total of Euro 10.7 million (of which Euro 2.2 million for reduction of trade payables, 3.3 million for increase of trade receivables, 3.4 million for food inventory increase, 0.9 million for VAT credit increase and 1.5 million other net credits increase (accounting treatment of fees paid on new credit facilities). These effects are considered to be contingent, linked to market segments and new businesses, as in the OCS/Nespresso, where clients do not pay immediately cash (as usual in automatic vending machines), in the sale of products in special locations and on trains, and the revamping and sale of vending machines for external clients, which imply the existence of a certain stock of working capital and lower percentage margins compared to the core vending business.
The mentioned changes in the tax area, although bringing a slight decrease of the average tax-rate, caused in 2018 an higher net use of cash for Euro 4.4 million, due to different and advanced payments, increased in 2018 to Euro 8.0 million, from Euro 3.6 million in 2017. The tax payments will normalize with the stabilisation of the new rules on depreciation according to Industry 4.0 decree.
In addition to the cash flow related to operations, during 2018 were paid Euro 10.5 million of dividends (on July 2018) and Euro 12.8 million for the antitrust fine of 2016 (monthly instalments ended on March 2019).
As of 31 December 2018 the group has also approximately Euro 13.6 million of VAT credit and financial assets for Euro 20.9 million (n. 2,130,024 treasury shares coming from the redemption of the business combination SPAC-IVS of 2012) not included in Net Financial Position.
The Net Debt/EBITDA ratio calculated according to the criteria applied to verify covenants of existing loans and bond (proforma considering the effects of yearly acquisitions) is below 3.
Other significant transactions and events occurred after 31 December 2018
In 2018 IVS Group experienced an increase vending volumes, specifically in the coffee / hot beverages segment; a slight increase, also like for like, but always higher than the general trend of consumption seen in the main market, a proof of the effectiveness of IVS commercial strategies and of its product and service mix.
The actions related to the agreement with Nespresso Italiana will continue, also through new partnerships in Italy, that in 2019 will consolidate additional volumes in the OCS market segment and new market niches.
The overall scenario remains uncertain, in line with the changes in GDP and hours worked in the countries were IVS operates.
In the period, operating margins were influenced by the increase of positioning fees/redevances, especially in public locations; the group strategy is to compensate the increase of these costs with the increase of the average price per vend, reaching higher margins in absolute amount.
In such competition context in the vending sector, the opportunities to increase market share are growing, and IVS already proved its capacity to improve its position also weak market periods, as in 2013-2015.
Therefore, IVS Group will continue its solid growth path, through acquisitions aimed at increasing local density, combined with a capex policy that will maintain a high service value and a sustainable capacity to generate high margins.
On January 31st, 2019 IVS Group’s subsidiary, IVS France S.a.S. acquired the entire participation of Reves de Cafè, a company active in the OCS vending sector, for a provisional consideration of around Euro 0,5 million.
On February 15th, 2019 IVS Group subscribed derivatives instruments to hedge interest risk on its new credit lines for a total amount of Euro 120 million, of which Euro 50 million starting on March 21st, 2019 and Euro 70 million starting on June 21st, 2020.
On February 28th, 2019 IVS Group, acquired the entire participation of SDA-Società Distribuzione Automatica 2000 S.r.l. for a provisional consideration of around Euro 20.6 million paid cash and transferring to one of the sellers n. 234,206 IVS Group treasury shares. SDA-Società Distribuzione Automatica 2000 S.r.l. is active since more than 50 years in the vending business in Italy and is the leader in Liguria region, with sales of around Euro 13.2 million in 2017.
On February 28th, 2019 IVS Italia S.p.A. acquired Roma Distribuzione 2003, active in the vending sector in Lazio, already rented from January 1st, 2019. The business acquired generates annual sales of around Euro 4 million and its provisional enterprise value was valued around Euro 4.9 million.
Since February 2019, IVS started a collaboration with the payment institution Alipay, owned by the Chinese group Alibaba, aimed at increasing the diffusion of new payment application on its vending machines.
The growing numbers on connected and digital payment systems of the vending machines network, which are the result of a long term investment policy, will allow the start of direct marketing campaigns, also in joint-venture with leading players in the food & beverage sector.